Sybase hit the $1 billion revenue mark in posting its year-end results Thursday--and we're not talking the number of hamburgers served, either.
But is meeting its milestone mark of $1 billion in revenues, along with soundly beating analysts' fourth quarter revenue and earnings forecasts, (as noted by The Street.com), enough to fight off a proxy battle with one of its largest shareholders, Sandell Asset Management.
Sandell wants Sybase to consider selling off its mobility business in an IPO, or even unloading all or part of the company via a sale. And to push the issue, Sandell wants to replace three of Sybase's nine directors, who will be up for re-election this year.
Although Sybase CEO John Chen declined to talk about Sandell or its proxy fight, he did note that Sybase's mobility business is a key growth driver for the company--not as an add-on business but rather something that's baked into its core.
Sybase's end game is to build an enterprise stack based on software to cater to corporate America's mobile workforce. It's looking to tie in mobile middleware and messaging into its core database business, while creating an enterprise mobile platform on top of which customers can put their mobile applications.
As a result, Sybase's plans are to be the software stack for enterprise mobility.
During the quarter that just closed, Sybase saw its mobile middleware business grow 22 percent year over year, and its messaging business climb 13 percent. Overall, the company's mobility business generated a total of about $91 million in the fourth quarter, representing less than a third of the $295.2 million it generated in the quarter.
Sybase is also looking to be the hunter--not just the hunted. Chen said don't be surprised to see the company make future acquisitions in the mobile commerce arena.
Las Vegas, or "Sin City"--24/7 gambling, drinking, food buffets and general round-the-clock fun. It's a great place to take tightly wired co-workers and get them unwired.
But that's not quite what Rob Veitch has in mind, when he attends Sybase's annual TechWave user conference in Las Vegas beginning Tuesday.
Veitch, senior director of business development for Sybase, touted his company's plans to unveil its unwired enterprise partnership with Taiwanese smart phone maker High Tech Computer (HTC) at the conference.
The HTC alliance is designed to bolster Sybase's mobility efforts, in getting corporate America and its customers unwired. HTC, which manufacturers smart phones and allows its customers to slap their own labels on the devices, is working with Sybase to bake its software into its smart phones early in the process.
Sybase and HTC, for example, are working on rolling out 500,000 PDAs for U.S. Census takers come the 2010 census. I personally can appreciate an electronic version of the census forms, given I was a pencil and paper census taker in college.
Besides getting unwired over the course of the week, Sybase users will also hear about the company's next-generation enterprise mobility platform. The goal is to broaden the functionality of Windows with a platform that can support custom mobile applications.
Sybase CEO John Chen is looking to build a ladder.
But before you hand the guy a hammer, try driving over a truckload of shims. You see, one side of Chen's ladder is his core $700 million in database sales, the other side is a mere $300 million in mobility sales.
Get the picture?
"I want to build a ladder with two comparable businesses, worth $800 million each," an enthusiastic Chen exclaimed the other day, during an interview after Sybase posted stronger than expected second quarter results.
So, as Chen checks out the local M&A hardware store, he has a general idea of which aisles to check out.
For starters, he's looking to expand his iAnywhere mobile middleware software stack, with such potential goodies as authentication security software, or GPS, to name a few.
And while he's in the mobility section, he also wants to peruse down the aisle that offers up items to foster Sybase's application enhancement platform efforts. No, Sybase isn't shopping for mobility applications, but rather platform software from which mobility applications can be distributed to customers.
Chen is no stranger to shopping around for mobility buys. Last September, Sybase announced plans to buy messaging company Mobile 365, which it now operates as its messaging unit Sybase 365. Together, Sybase 365 and iAnywhere comprise that side of the ladder Chen is looking to grow.
And what does he expect to accomplish as he builds this ladder and perches from its highest rung?
"Connecting enterprise customers," says Chen. "I need to have a way to tie mobile messaging back into my core enterprise customers."
That's the good news.
Revenues, however were slightly weaker than what Wall Street soothsayers were expecting, coming in at $230 million, verses their expectations of $231.6 million. The company's stock got punished, falling 6.8 percent to $24.42 a share at the close.
That's the bad news.
John Chen, Sybase's CEO, says he's baffled by the street's reaction, given that revenues overall were up 18 percent over the same period last year and the company's growth driver ? mobile software ? rose by double digits.
Sybase is making a big bet on mobile, with its most recent move including a $397 million cash acquisition of Mobile 365 last November, according to a report in The Street.com. With that deal, Sybase got into the mobile messaging service business and racked up $31 million in messaging revenue during its first full quarter, as it sent over 17 billion messages across its Sybase 365 network.
But analysts say the whole messaging industry is experiencing tremendous volume and growth and the real key for Sybase, as well as others, will be to keep their pricing from undergoing commoditization.
Chen says he's walking into this industry with his "eyes wide open" and he has a few strategies up his proverbial sleeve to offset pricing pressures. One strategy calls for leveraging other Sybase businesses, such as its analytics platform, to deliver more mobile services than its competitors.
And over the next five years, he hopes to have his mobile business account for half of Sybase's total revenues. Currently, 25 percent comes from mobile and remainder from its database business.
In the next three to five years, Chen says he'll know if his strategy to link the two pillars of his business is working. The countdown has begun.
Conventional wisdom has it that software companies, accustomed to charging license fees on the basis of how many processors are in a computer, are struggling with the arrival of multicore processors. Companies such as Oracle or IBM want to charge per processor core now that multiple processing engines can be crammed onto a single slice of silicon, or in the case of Intel's new Xeon 5300 "Clovertown" processor, into a chip package. Some companies charge per processor socket, while others persist in charging per processor core.
But according to one software executive, the market is one step ahead of conventional wisdom. It's already decided per-core pricing is a thing of the past, said Mark Westover, Sybase's vice president for corporate development. Westover's comments came at an Intel conference in San Francisco on Tuesday to discuss software issues raised by multicore processors.
"We studied the impact of dual-core and how did dual core affect how we priced. Our strategy for dual-core was 'we're going to count each core as a CPU.' We didn't change our price at all," Westover said.
"We watched to see what happened. Did the sales force actually apply an incremental discount to that, because there's a perceived discount in the customer's mind? The answer was yes," Westover said.
Sybase then measured pricing and found that the sales force discount matched prices of those who'd changed their prices, Westover said. The next question is whether Sybase should formally change its prices, or just let the market forces handle it, he said.
"Now that we have quad core and anticipate many more cores coming down the line, we're in the process of evaluating how we respond. On the one hand, there's part of me that says we absolutely have to respond. We have to adapt. There's no question this is an inflection point for software pricing models, and we need to change," he said. "However, I love the fact that the market adjusts for itself anyway. Maybe we really don't have to do anything because the sales force has implemented a policy that's fairly well in line with everybody else."
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